Buying a new home is probably the single largest investment you will ever make. The costs of the mortgage in addition to the closing costs, broker costs and other related fees can add up quickly. In some cases, you may be able to roll certain costs of the mortgage into the mortgage loan itself rather than having to pay the fees out of pocket at the closing table.
Some lenders will allow you to roll in the closing costs of the loan providing there is enough equity in the house. If the appraisal shows the home value to be $150,000 but the purchase price of the home is only $130,000, you may be able to finance the closing costs of the loan right into the mortgage. If the lender is willing to sign off on the deal, you could finance as much as 100 percent of the total value of the home. That would leave an extra $20,000 available to pay for closing costs and fees.
If you are working with an FHA approved lender or a bank which offers construction loans for houses, you may be able to roll in the costs of home improvement and repairs. The home will be assessed as is, and an estimate will be provided on the cost of all necessary repairs and upgrades as well as the approximate value which the house will command following the completion of the renovations. The mortgage may be written up to a certain dollar amount exceeding the purchase price with a refund granted back to you to complete repairs. Alternatively, you may be granted a temporary construction loan with funds dispersed according to the lender's discretion for work to the property. Following work completion, the remaining balance of the home's purchase price will be converted to a traditional mortgage.
Seller concessions may also be rolled into the cost of a mortgage. When you make an offer to purchase a home, you can request that the seller make certain concessions. These concessions might include contributing to closing costs or providing funds to replace flooring, appliances or other home improvement projects. If the sale price of the home is $100,000 and the cost of the requested seller concession is $8,000 for instance, you would submit a contract offer to purchase the house at a cost of $108,000 with a concession written into the purchase agreement that you will be credited $8,000 by the seller at the closing table. Your requested mortgage amount would then total $108,000 minus your down payment.
- Photo Credit hipoteca americana image by caironbohemio from Fotolia.com the cost of housing image by Pix by Marti from Fotolia.com renovation image by jeecis from Fotolia.com
Home Refinancing Vs. Home Equity Loan
You can get a home equity loan as part of a home refinance. However, an equity loan takes second place to a...
Can You Roll Closing Costs Into an FHA Loan?
The Federal Housing Administration insures approximately one-third of America's mortgages. As the world's largest government insurer of home loans, the agency protects...
Can You Add Closing Costs to a Mortgage Loan?
A home requires a certain amount of equity for a refinance or purchase. Mortgage lenders and third parties in your transaction charge...
How to Roll Debt Into a Mortgage
Mortgage loans are used for a variety of purposes. While the main purpose is home buying, these loans are often used to...
Can I Roll Renovation Costs Into a Mortgage?
You can roll renovation costs into a mortgage in a number of different ways. Federal assistance provides two different renovation loans, and...